Thanks for Visiting Washington State – That’ll Be $180,000

May 22, 2012

Some months ago, we here at the Tax Foundation first heard about the strange case of Pete Vegas and his six-figure tax bill from the state of Washington. Pete runs an agribusiness company that does business mostly in California, Arkansas, and Texas, although they ship their products nationwide. He explained his predicament in a recent op-ed:

As president of a national food company, I thought I had seen it all. Until, that is, the state of Washington decided to send me a $180,000 tax bill for simply visiting the the state. I understand that states are starved for revenue these days, but Washington has gone too far. Based on one visit over a seven-year period, it decided that my company, Sage V Foods, should be required to pay business and occupation taxes. Washington made that determination even though Sage V Foods has no employees, no property, no sales offices and no inventory in the state – nothing.

[…]

Washington has a sneaky way of catching companies in its tax trap. A few weeks after one of our trucks stopped at a weigh station during a routine delivery, we received a questionnaire in the mail from the Department of Revenue. The letter seemed innocuous enough, but it absolutely wasn’t.

It asked whether one of our employees visited the state once a year for business purposes. We answered yes, that was possible, and Washington pounced. It audited us and imposed seven years’ worth of taxes, interest and penalties. Washington claims Sage V Foods has a substantial connection to the state because we, on very rare occasions, cross its borders to do business. That’s outrageous.

Pete also talked about his case with us recently on the Tax Policy Podcast. Listen here!


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